Now that I’ve had a chance to examine what OMB Director Jack Lew actually said about the pay-fors in the American Jobs Act, the gambit is becoming more clear. Here’s the scenario, as best as I can describe it:

The Administration had been readying a $3 trillion package of deficit reduction to submit to the Super Committee. Then the idea came along for this American Jobs Act, and specifically to move it as a piece of legislation. That bumps up against statutory rules around offsets and pay-fors that would be needed in the legislation as long as it wasn’t seen as emergency funding. So the Administration shifted its most populist ideas from the already-conceived $3 trillion package into the American Jobs Act pay-fors. And, they’ll now have to come up with an additional $450 billion in deficit reduction to meet their targets of a paid-for jobs bill and $3 trillion in deficit reduction for the Super Committee.

In other words, these eliminations of tax breaks for corporations and the rich aren’t really “paying” for the jobs bill. Whatever the Administration will employ to replace that spending in the deficit reduction package they release next week will really be paying for it.

Lew basically admits this in the White House briefing:

This is a standalone bill. It has the investments in growth and jobs, and it has some provisions that pay for it. By raising the target of the joint committee what we’re saying is Congress should pass the jobs bill now with the pay-fors, and when the joint committee reaches its decisions later in the fall, it can then either put in new offsets to pay for it, and that would trigger the pay-fors in the bill off, or it can do the original target of $1.5 trillion and then the pay-fors that are in the jobs bill will stand […]

And let me also point out that we are pulling out of the package that we’ll present next week the pieces that, self-contained, are the jobs and growth package and the pay-for. We’re going to have a lot more detail a week from today of what the overall deficit reduction package is. We’re going to overachieve, beyond the joint committee target.

What the President has been saying and will continue saying is we need to do the jobs bill and the growth package now and we need to deal with the fiscal challenges, and frankly, we should do more than the target the joint committee has. This is the piece that, taken alone, would do the jobs and growth package in a paid-for way.

Lew did not specifically say that the Administration would now have to find $450 billion in solutions to replace the ones they “pulled out” of their deficit package, but the implication is pretty clear. They want to deliver a deficit package that is bigger than the $1.5 trillion mandated by the debt limit deal. And now $450 billion in their solutions have just been taken away to pay for the jobs bill. You can’t count the deficit reductions twice, so new solutions will have to be put in place.

In other words, it’s worth viewing both the jobs bill and the action at the Super Committee as one large package. If the President decides in a last gasp to wed the two together by saying that he will not sign a deficit bill without the American Jobs Act included, then that perception will become reality. And then we can weigh the $450 billion in up-front jobs measures against the trillions in deficit reduction, including potential cuts to the safety net. We’ll have at least the Administration’s blueprint for this package by next Monday.

UPDATE: And now another data point. According to Sam Stein, the “jobs act would amend the $1.5 trillion target for the super committee to make it $1.95 trillion.”

Keep in mind that in the White House’s perfect world, the American Jobs Act would pass right away, well before the Super Committee recommendations. So increasing the Super Committee target by $450 billion essentially makes room for the jobs bill offsets.

UPDATE II: This gets more and more interesting. Here’s the text of the American Jobs Act. Here’s the relevant section:



(a) INCREASED TARGET FOR JOINT SELECT COMMITTEE.— Section 401(b)(2) of the Budget Control Act of 2011 is amended by striking “$1,500,000,000,000” and inserting “$1,950,000,000,000”.

(b) TRIGGER FOR JOINT SELECT COMMITTEE . – Section 302 of the Budget Control Act of 2011 is amended by redesignating subsection (b) as subsection (c) and by inserting after subsection (a) the following new subsection:

“(b) TRIGGER.— If a joint committee bill achieving an amount greater than “$1,650,000,000,000” in deficit reduction as provided in section 401(b)(3)(B)(i)(II) of this Act is enacted by January 15, 2012, then the amendments to the Internal Revenue Code of 1986 made by subtitles A through E of title IV of the American Jobs Act of 2011, shall not be in effect for any taxable year.”.

Let’s try translating this. First, the target goes up to $1.95 trillion, $450 billion more (the price of the jobs bill) than previously. But here’s the other important part. If the Super Committee comes up with $1.65 trillion in deficit reduction or more, the pay-fors in this bill go away. It acts as a second trigger, which would raise taxes on the wealthy and corporations if the Super Committee doesn’t get the job done.

David Dayen

David Dayen